Second Circuit Holds that Dukes Prohibits Certification of ERISA Claim Under Rule 23(b)(2)

In Nationwide Life Insurance Co. v. Haddock, No. 10-4237 (2d Cir. February 6, 2012) [pdf], the Second Circuit reversed a district court order granting class certification.  The plaintiffs in Haddock assert that Nationwide breached its fiduciary duty under ERISA by allegedly collecting “revenue sharing payments” from mutual funds that Nationwide selected as investment choices for its annuity holders.  The district court previously granted class certification under Fed. R. Civ. P. 23(b)(2), which permits certification of class actions where “injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” 

Prior to the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011) [pdf], it was common for similar “hidden fees” cases to be certified as class actions.  The Second Circuit even went out of its way to state that the district court’s order granting class certification was correct under the Second Circuit’s analysis that predated Dukes.  However, the Second Circuit recognized that, under the Supreme Court’s holding in Dukes, “a class complaint alleging numerous individual claims for monetary relief may not be certified under Rule 23(b(2) ‘at least where … the monetary relief is not incidental to the injunctive or declaratory relief.’” Slip op. at 4 (quoting Dukes at 2557.)   

Analyzing the suit before it, the Second Circuit concluded that the plaintiffs’ claims for monetary relief were not merely incidental to the claim for equitable relief.  Specifically, the Second Circuit observed that should the plaintiffs be successful in establishing liability, the district court would need to determine the specific monetary recoveries to which each individual plaintiff would be entitled. The Second Circuit then recognized that “[t]his process would require the type of non-incidental, individualized proceedings for monetary awards” that the Supreme Court said are impermissible under Rule 23(b)(2).  The Second Circuit has remanded the case back to the district court to determine whether certification is appropriate under Rule 23(b)(3), which permits certification of claims for monetary relief where common issues predominate over individualized issues.

Lessons Learned . . .

When faced with an ERISA class action, Dukes may be helpful in defeating class certification where members of the purported class are each seeking separate monetary recoveries, which are more than merely incidental to the injunctive relief pursued by the class.  While pre-Dukes precedent often afforded certification of “hidden fees” cases, the post-Dukes litigation landscape is different and should be accounted for in planning for the strategy of defending and/or pleading a Rule 23 class action premised on claims under ERISA.


Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.